Transcript of April 2023 Middle East and Central Asia Department Press Briefing
IMF News, April 13, 2023
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- Published: April 13, 2023
Regional outlook: Middle East and North Africa (MENA)
- GDP grew by 5.3 percent in 2022, reflecting strong domestic demand and the rebound in oil production.
- Growth is projected to slow to 3.1 percent in 2023 due to tight policies to restore macroeconomic stability, agreed OPEC plus production cuts, and the fallout from the recent deterioration in global financial conditions.
- Exporters’ growth is projected to slow from 5.7 percent in 2022 to 3.1 percent in 2023, with the main driver of growth shifting from oil to non-hydrocarbon activities in most countries.
- Emerging markets in the region: growth falling from 5.1 percent to 3.4 percent.
- Low-income countries in the region: growth at 1.3 percent in 2023, hindered by high commodity prices, macroeconomic instability, and country-specific fragilities.
- OPEC plus production cuts: expected to lower growth for the GCC region but improve fiscal and external positions as higher oil prices offset lower output.
- Higher oil prices likely to increase fiscal and external strains for MENA importers.
- Inflation in MENA: after surging last year, forecast to remain unchanged at around 15 percent in 2023 before declining modestly in 2024.
- REO analytic chapter on the region’s monetary policy response to the recent inflation surge to be released this afternoon at 5 p.m.
Regional outlook: Caucasus and Central Asia (CCA)
- CCA growth in 2022 was supported by post-pandemic recovery, spillovers from Russia’s economy, high oil prices in exporters, increased transit trade, and inflows from Russia to oil-importing countries.
- Growth is expected to slow to 4.2 percent in 2023 as some spillovers fade.
- Headline inflation in CCA: projected to remain at around 12 percent in 2023 before slowing further in 2024.
- The war in Ukraine remains a major source of uncertainty for CCA countries.
Inflation and financial market developments
- Headline inflation in MENA: around 15 percent in 2023 (unchanged from prior surge), modest decline expected in 2024.
- Headline inflation in CCA: around 12 percent in 2023, slowing further in 2024.
- Spillovers from recent global financial market instability to the region’s banks have been limited, reflecting no direct exposure to Silicon Valley Bank and limited exposure to Credit Suisse.
- Financial markets in the region have moved in line with global trends; countries with large debt burdens have seen larger impacts.
Key risks to the baseline
- Further financial sector instability in advanced economies could lead to contagion, more adverse credit conditions, depressed global growth, increased financial market volatility, and debt sustainability concerns for many MENA emerging markets.
- Tighter-for-longer global financial conditions could prompt investors to reassess debt sustainability, pushing the most vulnerable economies to the brink of debt distress.
- An escalation of the war in Ukraine could cause high volatility in commodity markets, fueling additional inflationary pressures across the region and amplifying risks of social unrest.
Policy recommendations and priorities
- Monetary policy: focus on maintaining or regaining price stability.
- Bank supervision: ensure governance and risk management commensurate with risk profiles, including capital adequacy and liquidity stress tests.
- Fiscal policy: preserve debt sustainability with buffers while providing targeted and temporary support to protect the most vulnerable where needed.
- Structural reforms: accelerate reforms to boost potential growth, enhance resilience, promote inclusion, and build social safety nets.
- Ownership and social dialogue: emphasize country ownership of programs and broad consultation with stakeholders (trade unions, civil society) to enhance program success.
IMF support and financing in the region
- Since 2020, the Fund has supported MENA and CCA members with $29.7 billion dollars in financing commitment.
- Allocated $49.3 billion Special Drawing Rights to boost the region’s reserve assets.
- Recent Fund arrangements cited for Armenia, Egypt, Mauritania, and Morocco.
Country highlights and specific notes
- Saudi Arabia:
- Saudi economy in 2022 had G20’s highest growth at 8.7 percent.
- Oil sector growth of 16 percent in 2022.
- Non-oil sector expected to grow about 4.5 percent in 2023 and 2024, with medium levels about 4 percent in following years.
- Inflation remains under 3 percent; Riyal linked to U.S. dollar contributed to price stability.
- Recommended continued conservative fiscal policy, rapid diversification, and productivity improvements.
- Morocco:
- 2022 growth negatively affected by drought; 2023 outlook better.
- Policies over the past decade strengthened economic stability and social protection; IMF approved a new program as part of its partnership.
- IMF kept a 3 percent growth expectation for Morocco.
- Tunisia:
- IMF engagement has been continuous for about a decade; Tunisia was the first in the region to benefit from IMF support during COVID-19.
- Staff‑level agreement reached; program described as Tunisia’s own, designed by Tunisian authorities with extensive domestic consultation.
- IMF notes current subsidy system is very regressive (example cited: for the 50 liter of gasoline the State is paying you back $20).
- IMF emphasizes strong country ownership, social dialogue, and targeted social protection to mitigate reform impacts.
- Pakistan:
- Country at a critical juncture; inflation has exceeded 34 percent and must be addressed.
- Policies adopted are heading in the right direction; discussions with IMF ongoing to secure measures needed for review and to ensure financing needs are met.
- Priority areas: monetary stability, flexible exchange rate, mobilizing assistance for flood consequences, and social protection for affected populations.
- Egypt:
- Growth in 2022: 6.6 percent.
- Inflation has exceeded 30 percent.
- Near‑term growth impacts from war in Ukraine and inflation; medium-term outlook: return to levels of growth that exceeds 5 percent in 2024 and onward if reforms are implemented.
- Financing gap over the coming 4 years estimated by IMF at $17 billion (question referenced in briefing).
- Program priorities: exchange rate flexibility to shield from external shocks, monetary policy to combat inflation, deepen private sector role, and targeted social protection.
- First review preparations have started; date of first review to be announced.
- Jordan:
- Has confronted major shocks (pandemic, inflation, global financial volatility) and maintained economic stability despite high debt.
- Recommendations: deepen reforms to improve business environment, reduce cost of doing business, invest in new and alternative energy sources, and expand services-sector employment opportunities.
- Afghanistan:
- Economy entered severe downturn after political change; IMF concerned about bans on women and girls attending universities and working.
- IMF looks forward to conditions being met for reengagement to provide support to the Afghan people.
- Lebanon:
- IMF reiterates commitment to helping Lebanon exit its severe socio-economic crisis; stresses need for comprehensive reforms, technical support, and restoring confidence.
- IMF engagement includes consultations and technical assistance aligned with Lebanese authorities.
Events and operational notes
- Full regional economic outlook to be launched in Dubai and in Kazakhstan next month.
- REO analytic chapter on the region’s monetary policy response to the recent inflation surge to be released this afternoon at 5 p.m.
- Upcoming Annual Meetings in Marrakesh in October highlighted as a platform for policy discussions; themes include resilience, stability, and future challenges (climate, youth, women).
Transcript of April 2023 Middle East and Central Asia Department Press Briefing; April 13, 2023; IMF Communications Department.